In-house Inspections are performed by a 3rd Party – So not paid outside of closing. Paid to 3rd party as inspections are completed for draw requests. The Loan Payoff could be over or short on fees.

1) If there were more inspections that collected, does the Bank absorb the additional costs?
2) If there were fewer inspections completed, are the excess funds forwarded to the customer?
3) How does this affect the closing disclosure?

"In-house Inspections are performed by a 3rd Party – So not paid outside of closing."

Sorry, I don't understand what this means.

Here is some additional information:

The bank orders the inspections for each draw request. The amount is $100 per inspection. They may collect $700 but only use $500. Or, they may use $900 but only collected $700.

When the construction is in progress and there is a circumstance where an extra inspection has to be ordered, is the bank issuing a change in circumstance and reissuing a LE within the 3 days of the change?

My understanding is that the loan is closed. When the construction phase is complete, the customer then obtains a take out loan to payoff the mortgage. Does the bank need to reissue a CD and/or absorb the additional costs?

When the construction is in progress and there is a circumstance where an extra inspection has to be ordered, is the bank issuing a change in circumstance and reissuing a LE within the 3 days of the change?


???? If the loan is closed and already being funded, how can you issue a revised LE?? You are adding this to the permanent loan?? There is no changed circumstance on the permanent loan. An additional $100 inspection fee on the construction loan is a subsequent event and should be addressed in your construction loan agreement if you legally want to collect it from the borrower. It cannot retrospectively impact the disclosures already given on the construction loan.

Thank You.

Hi Randy -- can you advise how to handle the situation where the bank collected at closing the amount for 3 inspection fees $300 ($100 per inspection) but during the construction only 2 inspections were needed? Do we just refund the amount of the extra $100 inspection fee in cash to the borrower after construction is complete? could we apply it to the principal balance in lieu of a cash refund? A revised CD is not needed in this case either, correct?

No revised closing disclosure would be required because the amount was accurate at the time of closing, and the change resulted from subsequent events. A simple refund of the extra $100 is warranted. A credit to the loan account would also do the trick, unless there is a reason for not applying the credit to the loan. Document how you completed the refund, and move on to the next challenge.

Thanks much John.